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It's lately become fashionable to worry about federal debt soon (by the end of this year) exceeding GDP. As much as I abhor Washington's utter disregard for fiscal sanity, we are still a long way from seeing federal debt exceed GDP. Those who claim we are close are exaggerating, because they use "Total Debt Outstanding," which happens to include $4.5 trillion of "Intragovernmental Holdings," otherwise known as debt that we owe to ourselves (e.g., Treasury securities held by the Social Security Adminstration). That is not really debt, it is just a promise that one arm of the government will deliver money to another arm. The proper amount of current federal debt, which can be found here, is "Debt Held by the Public," which is just under $8.6 trillion today. That is debt that our federal government is obligated to pay to individuals and institutions both here and abroad.

Using reasonable assumptions about the next six months of debt and nominal GDP growth, net federal debt by the end of this year will likely be about 60% of GDP. That's more than anything we've seen since the early 1950s, but it's not yet of catastrophic proportions.

It's going to be rising fairly rapidly, of course, especially if federal spending is not checked and the economy experiences a weak, "new normal" recovery, as most seem to expect. But still it's not likely to exceed 100% of GDP for at least 4-5 years, and even then it won't be anywhere near the levels that have existed in Japan for many years already.

Debt and deficits are on an unsustainable path, to be sure, but we are not yet beyond the point of no return. There is still time to make a mid-course correction; there is still room for optimism. We are following in Greece's footsteps, but we are still way behind them. That's no reason to cheer, but it is a reason to try to fix things before they reach the breaking point, and that's what I'm hoping will happen in the wake of the November elections.